China’s PMI Data Signals Economic Divide: Manufacturing Contracts, Services Edge Up in July 2025
China’s economic pulse on July 31, 2025, showed a sharp division between its manufacturing and non-manufacturing sectors. While the non-manufacturing PMI crept up to 50.1, indicating a slight expansion, the manufacturing PMI, as reported by the National Bureau of Statistics (NBS), was 49.3, indicating a fourth consecutive month of contraction. These numbers, which are below projections (49.7 for manufacturing and 50.2 for non-manufacturing), provide a nuanced picture of the second-largest economy in the world battling both internal and international issues. What does this mean for China’s economic trajectory and international markets as trade tensions increase and domestic demand falters? Let’s examine the figures and what they mean.
The manufacturing PMI of 49.3, which decreased from 49.7 in June, highlights the ongoing difficulties in China’s industrial core. A contraction is indicated by a PMI below 50, and the decline in July is a result of declining factory output and new orders, which are being driven by weak domestic demand and a cautious global market. A Business Today report claims that the drop emphasizes the strains caused by supply chain modifications and export uncertainties, which are made worse by tariff threats and U.S. President Trump’s impending August 1, 2025, trade deadline. Reduced demand both domestically and internationally was indicated by the production index dropping 0.5 points to 50.5% and the new order index dropping 0.8 points to 49.4%. Medium and small businesses, with PMIs of 49.5% and 46.4%, respectively, stayed well within contraction territory, while large businesses fared marginally better at 50.3%.
The non-manufacturing PMI, on the other hand, showed some resilience with a slight increase to 50.1. Despite a decline in construction (51.0%), this sector, which includes services and construction, saw a slight increase from 50.5 in June, driven by modest growth in services (50.2%). Although subindices like new orders remained soft, suggesting an uneven recovery, this expansion, albeit weak, suggests pockets of stability in consumer-facing industries. These numbers are supported by posts on X, such as those from @Sino_Market, which highlight the manufacturing PMI’s miss and the non-manufacturing sector’s brittle growth, indicating that analysts are cautious.
These figures have an impact on already tense markets around the world. Supply chains may be affected by China’s manufacturing problems, especially in the electronics and automotive sectors, and the modest increase in services may not be enough to counteract the overall economic downturn. China is under pressure to boost domestic consumption without increasing its debt because of the impending U.S. tariffs and the uncertainty surrounding global demand. Despite external challenges, Beijing’s policymakers may rely on targeted fiscal measures, but it is unclear how effective they will be.
The PMI data warns investors and policymakers to exercise caution. While the fragility of the services sector restricts optimism, a contracting manufacturing sector may reduce demand for commodities globally. The world keeps a close eye on China as it walks this economic tightrope. Will trade tensions around the world widen the gap, or will Beijing’s next actions stabilize growth? The PMI data from July 2025 lays the groundwork for a crucial time to come.
